EuroBusiness Media (EBM): Altran, global leader in engineering and R&D services, is announcing its strategic acquisition of Aricent today. I have the pleasure of discussing this with Dominique Cerutti, its Chairman and CEO. Hello. So, what makes this such a strategic announcement for the engineering and R&D services industry?
Dominique Cerutti: So, in short, we are announcing today the creation of the undisputed global leader in engineering and R&D services. Upon completion, the group will employ 44,000 engineers and consultants in 33 countries. We will be number 1 in the USA, we will be number 1 in Europe, of course we will be number 1 globally. We will enjoy superior global delivery and we would gain leadership positions in key industries where we operate. At high level, from a financial standpoint, the top line will be north of €3 billion, the EBIT give or take 13% and the EBDA close to 15%
EBM: This clearly makes you industry leaders. How does this differentiate you from your competitors?
Dominique Cerutti : Our industry is fascinating, it’s just fascinating. To start with we think the addressable market is set to double by 2020 with an annual growth of 10% globally, reaching $220 billion addressable market by then. Second, there is a high contrast between the client side, which is highly concentrated, and the provider side, which is very fragmented. On the client side, meaning the top 1,000 global companies, they are facing a dual challenge. On the one hand, they try to really accelerate their innovation and differentiation in what is strategic for them in their R&D. On the other hand, they try to streamline and optimise what is non-core in their R&D and still mission critical. We think that these top clients will ship more and more business to fewer and fewer partners or providers if they can match four key strategic criteria for the client. 1 is of course the global reach in scale, 2 will be deep domain expertise by industry, 3 would be superior global delivery to optimise part of their R&D and 4 is of course control on key disruptive technology, horizontal, like design, software engineering, mechanical engineering, systems engineering, cybersecurity and so on. So, in the four key criteria, we would be with this combination at scale, leader and create a significant distance between us and any kind of competition; when you combine the four criteria together, it’s even better, we are the undisputed global leader in the engineering and R&D services space. So that’s why we are so excited with this deal. We are convinced it’s going to create significant value for our clients first, our shareholders of course and our employees, to finish.
EBM: Can you explain what makes this such a compelling transaction for your current & future shareholders?
Dominique Cerutti: Sure, several points. First, Aricent operates with a very strong financial profile, they are set for solid growth and their EBDA is close to 28%, so that is great. Second, of course, the deal is EPS accretive year 1. It is fully underwritten by three banks. It would be financed through a mix of cash, debt and rights issue, subject to shareholder approval. We have a very strong cash generation profile which will enable us to deleverage the company very rapidly and our core shareholder, Apax Partners, are fully in support of the deal and have announced their intention to follow the rights issue. So, we are convinced it is a very compelling transaction, creating significant shareholder value.
EBM: How does this acquisition fit within your Altran 2020 plan you announced to us 2 years ago?
Dominique Cerutti: It fits perfectly well. Indeed; we announced in 2013 a strategic plan called Ignition for 2015-2020 and, by the way, it’s important to underline that the Aricent executive team share the same vision as the one we articulated. So, in short, this combination accelerates our strategic plan by 2 years. That’s it. And from a financial profile, by the way, already in 2018 we would operate at the level that was committed for 2020 which is, give or take €3 billion top line and 13% EBIT and 15% EBDA. So, we are absolutely excited for this acquisition. We will go into detail of the strategy at our next investor day which is set some time mid 2018 and again we will be delighted to take our stakeholders through why we have created the undisputed global leader in the ER&D Services.
EBM: Well, I’m looking forward to the next time we meet. Dominique Cerutti, Chairman and CEO of Altran, thank you.
Dominique Cerutti: Thank you
